The Effect of Age upon CEO Compensation: A Cross-Industry Study

The compensation of CEO’s has been at the forefront of the public’s mind for the past few years. During the recession, one could not go a day without hearing about the atrocious salaries and bonuses that executives were being paid. Although it only recently became an explosive topic, academics have been researching all aspects of compensation for many years. One of the earliest looked at the idea of pay for performance (Jensen and Murphy 1990), and the field has taken off from there. Many studies have been done on the determinants of compensation, and I was interested in how age relates to compensation. I created a model for determining compensation, but also took it one step further and looked at the compensation structure across different industries as well. I found that age did indeed influence compensation levels, but that it only had some effect on pay structure and only in certain industries.